Texas Governor Rick Perry is the news media’s Flavor of the Month. He’s getting rave reviews, much of it focused on the miracle economy he has reportedly engineered. When you Google “Rick Perry unemployment rate” this morning, you will be treated to several thousand articles gushing that Texas’s unemployment rate is a point lower than the national unemployment rate.

So, Rick Perry is all in. As the great Texas anthropologist Jerry Jeff Walker observed, “when a Texan fancies, he’ll take his chances, chances will be taken.”

Perry’s rave reviews have to rankle Minnesota Governor Tim Pawlenty. Because when you look at economic and quality of life numbers through Minnesota goggles, Texas doesn’t look so miraculous.

So, remind me again, why do we want Minnesota and the whole nation to become like Rick Perry’s Texas?

Yes, taxes in Texas are lower than in Minnesota, and just about every other place on the planet. If your life’s ambition is to pay as little taxes as possible, Mr. Perry might well be the low bidder. But I lived in Texas as a poor student – hook ‘em Horns — and I can tell you that you get what you pay for. If your life’s ambition is for your family to have a decent income, good health care, and healthy, smart kids, Perry may not be your guy. The numbers tell the story.

Of course, Tim Pawlenty is no miracle worker either. Under Pawlenty, Minnesota took a dramatic step backwards. Thanks to Pawlenty’s cuts in state health coverage programs, uninsurance rates went from 6.6% to 9.1, a 29% freefall. Real median income has declined by 9%, which is twice as fast as the nation as a whole. Minnesota fell from 8th in the nation in per capita income to 14th. And despite throwing $150 million in handouts to business owners through his aborably named JOBZ program, job growth under Pawlenty was 0.5%, lowest of any of the former Governor’s seeking the presidency.

But give Governor Pawlenty his due. It’s not like he drove us below Rick Perry’s Texas.

Sure I could make a similar living as a PR dude in Texas as I could in MN. I also could be a PR dude for a U.S. corporation in a third world country and probably make as much as I do in Minnesota, probably more. My income would be the exception to the rule in those societies, but it is definitely possible.

But I’d rather be in snowy MN because 1) I may have to use community schools, doctors, and public health system at some point and that will degrade my family’s standard of living and 2) living in comfort while my neighbors suffer is not what I want out of life.

My view is colored by the fact that I include both communal and individual benefits in my calculations. That makes some folks conclude that I’m a Commie outlier. I plead guilty to the Commie charge, but I don’t really think I’m that much of an outlier. See polls indicating overwhelming support for just about every kind of domestic spending.

James J Hill brought my people here… so I go way back. I know Minnesota is great, for many reasons. But Minnesota exceptionalism is a false premise, and Minnesota chauvinism is one of our least appealing traits.

Over 100 plus years, the Minnesota civic experiment has been conducted among a very homogenous population. Adjust for that, and I don’t believe the quantitative merits of high tax, high service models are so clear.

“Minnesota Exceptionalism” was meant to be tongue-in-cheek self satire, but I do assert that high tax/high service states have advantages that, according to polls, Americans covet.

What about New York? High tax, high service, but a melting pot compared to MN. NY beats TX in all of those categories except real income (they do narrowly beat them in non-adjusted income, but NYC cost-of-living…). It can’t be said that those results came due to a homogenous population. You get what you pay for. If health coverage programs are cut, the uninsured rates, ailment prevention, health outcomes and cost shifting gets worse.

Again, I just don’t understand the current media assertion that “Perry has delivered what Americans covet,” based on a 1% unemployment rate differential for a state that is awash in record petroleum profits that are entirely unrelated to Perry. It’s a narrow and shallow analysis of Perry’s Texas.

In a CNN interview this afternoon, Debbie Wasserman Schulz (Dem Chair) highlighted the oil and OPEC factor in the Texas economy. She pointed out that Perry’s taking credit for the oil boom is unfounded, just as the claim of balancing the budget by other governors (like Pawlenty) is unfounded. They HAD to balance their budgets by hook or by [mostly] crook, and Perry could have been snoozing through his terms in office for all the difference he made to oil profits. Well,come to think of it, maybe he made a difference by curbing regulation and glossing over the dangers of fracking.

Texas property taxes can be outrageous, and their state and local sales taxes can total 8.25% are applied to clothing and services (including Turkish baths and escort services). They do have a back to school sales tax holiday every August, which I have to admit is kind of cool.

Newt, you always keep me on my toes. I’ve seen lots of coverage on the fact that TX’s unemployment is lower than the US, but I’ve also see stuff about TX job growth. On that front, a few considerations:

1) Their job growth hasn’t been able to bring them a better overall employment picture than MN and many other state, my original point.

2) Their job growth has a lot to do with record oil profits, something Perry has nothing to do with. TX is the second leading producer of oil and many oil companies are headquartered there.

3) Their job growth has a lot to do with the middle east wars/the federal government, and Perry has nothing to do with that. Texas is one of the leading aerospace and defense states.

4) The jobs available in Texas aren’t all that easy to live on. Texas Watch points out:

Texas has the highest rate of workers paid at or below the federal minimum wage and our median hourly wage is 10% lower than the national average. We are dead last in the percent of individuals with health insurance and are near the bottom in the percent of workers with employer-based health insurance.

As for workplace safety, nine Texans die on the job every week, making Texas the deadliest state to work in, according to data from the Bureau of Labor Statistics. As a percentage of workers, we also have the highest rate of workplace fatalities among the 10 biggest states. Also, with a quarter of workers without workers’ compensation coverage, we are last in workers’ compensation coverage, lagging far behind the rest of the country.

I’m not aware of anyone that keeps more comprehensive national labor statistics than the U.S. Department of Labor. If there is someone, I’m open to sharing them. If there isn’t, the best available data seems more useful than speculation.

Re: “By what manner do workers get paid less than the Federal minimum wage.”

BLS footnote in the provided link says:

…the presence of a sizable number of workers with wages below the prevailing Federal minimum wage does not necessarily indicate violations of the FLSA or applicable State laws, because there are numerous exclusions and exemptions to these minimum wage statutes.”

Re: “again, it’s (TX’s worst in the nation status on % of low wage jobs) that matter of homogeneity and demography.”

New York is a famous high tax/high service state that is also a world famous melting pot with lots of new immigrants and a very diverse population. The number of workers at or below the minimum wage in NY is less than half of Texas.

My guess, and it is a 100% fact free assertion, is that NY enforces minimum laws more vigorously than TX, doesn’t proactively recruit ultra-low paying firms as much as TX does, and doesn’t particularly care that higher taxes drive away low pay employers flocking to the TX’s of the world. That is, TX gets twice as many low paying jobs as NY because TX does it’s level best to attract low paying employers, while NY does not.

In other words, the fact that TX has twice as high a proportion of low wage jobs as NY is driven more by policy than demographics.

If the U.S. wanted to race to the bottom TX style to try to win away low wage jobs from low wage countries, we could take the whole country in TX’s direction. That’s not where I want the country to go.

My mellow, non-knee jerk dismissive side says he’s smart and I end up reading him, but he’s far from unimpeachable. He’s a wild eyed partisan, thus a bit sloppy in his facts. He’s enormously overrated as a public intellectual.

Billionaire financier Warren Buffet had an amazing commentary in yesterday’s New York Times. An excerpt:

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

….

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

“Much as if we were spotted owls.” Warren Buffet is an endangered species – a super wealthy American willing to share in the sacrifice needed to get America back on track.

Carried interest should be changed, and capital gains could probably be a tick higher. But the Democrats position continues to be that $250k households should incur a 40% rate on W2 income. That’s absurd. That’s not Buffet territory. As such, he makes some fairly illiterate points.

A lot of my fellow Americans sacrificed to make sure I started off my adult life with a great education, social safety net, a path to a dignified retirement, a clean environment, safe streets, a solid infrastructure to support my business, and a nation with a manageable debt. Our parents’ generation sacrified a lot to make that happen.

If Warren and the boys are willing to sacrifice so that we can give the same thing to future generations, I am too. I have no problem going back up to Clinton era tax rates.

Yes….you’re making an argument for income taxation and further for progressive income taxation, and most people are in civic agreement with that. It’s not illustrative of Buffet’s example though.

With marginal rates, in round numbers the difference between the 35% and 40% brackets would probably be $2500 in taxes for every $50k in income above $250k. I’m not saying this isn’t a meaningful amount of money, but being ‘happy to pay’ a scoche more is kind of a cheap sentiment.

Living without the Bush tax cuts is not the only way I would be willing join Warren and the boys in the shared sacrifice. If future generations need me to pay higher payroll taxes above the current cap, give up some or all of my home mortgage deduction, pay a carbon tax, delay retirement a bit, whatever. I’ll get in line to give future generations what I was given, but the wealthy should be in line with me.

I don’t think getting you to join Warren and the boys is the problem. It’s getting them to join you. Carried interest… the hedge fund exclusion… is immoral. The capital gains tax is a little too low. A lot of wealth in this country is chasing paper returns.

If your income is taxed at the highest marginal rate now… you’re no slouch.

The bookend to this is that conservatives (like Perry) believe too many people are not paying federal income taxes. Ex: my business suffered in 2009, my revenue probably went down 70%. I had a personal gross of $44k, an agi of $29k, no tax liability, and got a bunch of money back. It was absurd. That’s a bigger part of the revenue problem than you kicking in a few thousand dollars more. Besides the skin in the game aspect, there’s dozens of these examples for everyone one of yours.

More on Warren buffet–from Bruce Bartlett, a certified Reagan policy expert (because he wrote a lot of the Reagan economic policy) who is also a thinking Republican (and therefore a RINO in today’s Republican Party):

the core of the Republican argument (and your argument as well, Mike and Erik) is that the top tax rate is the critical thing for economic growth. So where is the data (any data) to support this assertion?

His core argument is one I’ve been making. Households who have AGI’s of $250,000 should not be taxed at top income tax rates, and Buffet himself is not an example that can be used to support raising the income tax…. particularly on those households.

Which is to say…. liberals conflate tax concepts so that they can make a purchase on moral authority where none really exists. Or, there is a certain amount of insurmountable tax illiterateness among them.

I believe these things, and I don’t find them all that arguable:

It’s OK for the federal government to collect 20% or so of GDP in taxes. As such, we need to get that bumped up now.

We have progressive income taxation. People who pay W2 income tax rates at top marginal rates are not shirking.

You have progressive taxation because that’s where the money is, they have the ability to pay, and they owe more to society. You don’t use it to make up for the regressivity of other taxes. You use different tax methods for different reasons.

Everyone who has a W2 income should pay the income tax. As I asserted earlier, we’re basically excluding everyone now with incomes of $50k or lower. That’s absurd. Skin in the game.

The carried interest situation needs to be changed.

Capital gains taxes need to be a tick higher.

A top income tax rate of 40% is OK, but it would be immoral for it to be higher.

OK, Erik, I was about to apologize and agree with you until i got to your little hiccup about a 40% tax rate being immoral. Immoral? Really? Does this offend your personal form of morality? (and, if so, why should anyone else pay attention to your quirks?) Or does it offend some more universal code of morality or religion that i am unaware of? If so, please enlighten me. Oh, and tell me what morality has to do with tax laws, anyway?

And, if we were to construct a tax system that was more in line with what Bartlett proposes, such as a separate tax level on all AGI above, say, $1billion per year, why not have a 40% level there? Or a 50%? Or even 75%? Again, as we all know, that means that people who earn more than $1billion/year would pay those rates ONLY ON THE AMOUNT ABOVE $1 billion. (sorry about the shouting–that is for the tax illiterates out there–not you or Mike, certainly).

And this ties in what i was saying in my earlier post with Bartlett’s main point–why not have lots of different tax levels that kick in way above an AGI of $250,000.00/yr? This is where i agree with you–leave the current levels and amounts alone, but put in a whole lot more, above those now in effect.

Again, i do not think that there is anything wrong about a 40% tax rate, or even a 50% or 75%, as long as it is on really high income levels. And saying things like a 40% rate is immoral really sounds like that republican orthodoxy that argues that tax rates are the most important determinant of economic growth–an argument for which there is no supporting data at all, as Bartlett points out.

It’s arbitrary. It’s a desirable number because it’s somewhat less than half. If it was more than half, you’d be working for someone else’s benefit rather than your own. Relax, its universal morality rather than a religious one.

You object to the core principles I laid out because you conflate the income tax with capital gains.

Buffet draw $100k in salary. His income tax is calced against that. The rest of his taxes are paid in capital gains, and it’s a lower rate.

If society wants to devise an AMT for situations like him, I don’t have real objections. But income and capital gains are not remotely the same and taxes need to be distinct. Capital gains tax needs to be a fair amount lower than the top income tax rate.

I agree with you about the difference between income taxes and capital gains and dividend, and what I was advocating was indeed some type of an AMT that would add back in those other taxes and calculate a surtax or some other charge at the very high levels–levels where i do not think that there would be any real disincentive to people from high rates (people like Buffet who are making huge amounts of money do not do what they are doing for the financial rewards–those have already been satisfied. They are looking for other rewards–psychic, status, bragging rights, etc.).

What i object to is that there is any problem with a 40% rate in situations like i described–or that there is necessarily any deterministic relationship between the top marginal tax rate (no matter what it is leveled on or at what amount of income) and economic growth. Both of those are far too simplistic to be true.

Sure, a flat tax of 40% on all income at all levels would be bad for economic growth, but a 40% income tax on even levels of $250,000.00 and up do not appear to have been impediments to strong economic growth. That is empirically true (as Bartlett points out). I’d be willing to go farther, and do lower tax rates at that level if there were higher rates above it.

And, i also agree with another of your earlier points–there is clearly no problem with having our total tax receipts at about 20% of GDP. right now we are well below that point. Simply getting our tax receipts back to that level would solve our deficit problems in the long run.

As a practical matter it may as well be a 40% ceiling. To the extent they can control it – and they can by large measures – people who earn that much won’t take their pay in W2 income. They’ll take a fixed salary of a relatively modest amount and then take a partnership dividend. They do this now. Among them, an enormous amount of Democrats.

Oh, if only Warren would come clean about this whole tax “debate.” Of course he paid less in taxes. He itemizes, I’m sure, and yes, takes advantage of different tax rates depending upon the sources of the income. What he doesn’t say and never wants to discuss is that doing the fair thing by going to a flat tax or two tax rates on all income — earned or unearned, as well as doing away with all the deductions, exemptions and loopholes, would make the tax system more efficient and fair. And it would be more hard to cheat and likely bring in far more revenue. Why, I believe the president’s own debt commission suggested as much, but alas, we keep falling back on the same old rhetoric and bullshit.

Not to take the role of the proletariat here but that’s because the wealthy have set it up that way. Nearly every itemized deduction was developed with and for the wealthy; they will stay that way for the wealthy. And you are right, Mike. Congress is composed of a bunch of gutless wonders.

The ire of those who want to close loopholes should be directed at congressional Republicans, who have opposed Obama’s proposals to close loopholes as a violation of their sacred “no new taxes” vow.

Has Buffet ever opposed elminiating tax loopholes that favor the wealthy? My cursory Googling couldn’t find any history of that. My guess is that Buffet supports improving tax fairness in whatever way possible, whether that means cutting loopholes that disproportionately favor the wealthy or increasing the rates the wealthy pay. But if he opposes closing loopholes that favor the wealthy, I’d join you in condemning him. But I don’t believe that’s his position.

You don’t have to Google anything to know that Warren keeps repeating the redistributionist ideas over and over like a broken record (a piece of vinyl that contained music for those under 45). Ditto Mr Obama who has shamefully ignored about 99 percent of his debt commission’s recommendations and may even deny the commission ever existed if pressed on the matter. I support new taxes….the kind I outlined above that neither party will ever support because it’s too easy to play the class warfare game from opposing sides.

I’m for a simple and fair tax — no deductions and 8-ish income tiers with progressively higher rates for higher incomes. That would simple. And it would be fair.

I’m not for a Forbes style flat tax — no deductions and 1 or 2 tax rates. Thousandaires, millionaires and billionaires would pay the same rates in that kind of system. That’s simple, but far from fair.

For the individual tax payer, both of the aforementioned approaches are just about equally simple. If having 8 tiers instead of 2 tiers adds any time to tax prep, it’s under a minute. Which of the 8 income tiers do I fall in this year? What’s my income times my rate? Done. You can’t credibly argue that’s not simple.

The fact that flat taxers like Forbes always want to use only 1 or 2 income tiers tells me that they are at least as interested in achieving regressivity as they are in achieving simplicity. And the fact that the Forbes’ of the world always seem to want their flat tax to raise less than the system it is replacing tells me that they are at least as interested in tax avoidance as they are in tax simplicity.

Simplicity is the buzzword used the most in flat tax marketing, but other less attractive attributes of the proposal are revealed in the details.

Just how do you think one or two tax rates with no deductions or loopholes is regressive or not fair? Could you show me the math? Say households over 20k pay 15 and those over 200k pay 20 percent. Those under 20k pay nothing.

Re: How is a flat income tax with one or two tax rates at one or two income levels more regressive and less fair than eight tax rates at eight tax levels?

Payroll taxes, gas taxes, tobacco taxes and other taxes are very regressive. Poor and middle income people pay a much higher proportion of their income in those taxes than upper income people.

The main tool policymakers have to offset the regressivity of those other parts of the taxation mix is the progressive income tax, with graduated tax rates that vary according to ability to pay.

But the flatter the income tax (i.e. less gradation along the income scale), the less progressive it is, and the less it therefore offsets the regressivity of other taxes in the mix. With a flat income tax with one rate, Forbes and his secretary are paying the same income tax rate. At the same time, Forbes secretary earning $80K/year pays payroll taxes on 100% of her earings. But Forbes, earning millions, is paying payroll taxes on 00.0X% of his income. Taking the regeressive taxes and the less progressive flat income tax together, the system gets much more regressive and unfair. With that kind of flattening of the income tax the Suits Index — the measure of overall progressivity/regressivity — would swing heavily in the regressive direction.

You liberals wear me out. Now you’re lumping all taxes into a discussion of income taxes. You don’t achieve fairness by manipulating the income tax to benefit the poor because they are paying taxes on gas etc. Simply give them money, like the earned income tax credit. Perhaps if we did away with the bullshit in the income tax code, flattened it and did meaningful Social Security reform, we wouldn’t need to tax the shit out of everything that moved. Here is tomorrow’s WSJ piece on Buffet and his tax position. Couldn’t have said it better myself.

Oh brother, really. Even a broken clock is right twice a day. What are the four most dangerous words ( usually uttered by those whose idea of history is about 10 years or shorter) that cause people to make bad decisions? “This time is different.” Today’s consumers of financial and economic pornography….I mean journalism….would be better served watching nothing at all. Not being informed would be better than misinformed. Anyone remember the Business Week cover from, I think, the 1970s titled “The Death of Equities?” How many so called end of the worlds do we have to endure before we figure it out? Death of capitalism is just the latest howler. Sure, the system that brought the world unprecedented advances is going kaput. How utterly ignorant.

Interesting commentary, PM. I didn’t get the impression Roubini was saying “death to capitalism” at all. He tries to present a rational middle ground; at least he presents specific ideas of what could be tried instead of merely calling people and institutions names.

Truth is, this all is way beyond what I remember ever happening before. To deny what’s happening at home might be comforting for some; but it’s disastrous for millions of others.

It’s curious that some are threatened by even the mere suggestion that that perhaps it’s time to open up a new dialogue. Face it. An economy based on the Industrial Age made us the richest nation in the world; but the same model does not compute in the Age of the Internet. Them factories aren’t cranckin’ out them cars anymore.

And if the current economic models have worked and are working so well that we shouldn’t question them, then we and a lot of our Euro friends are in serious trouble. See France, Italy, Greece, Germany and – of course – Great Britain.

Why are we so protective of the top one-third of one percent of Minnesotans (those making more than $1 M per year who would have had their taxes raised by Dayton’s last offer) that we’d rather raid the state’s tobacco settlement bond fund and K-12 funding to “balance” the budget rather than ask “the wealthy” to pay one cent more? Geez. Talk about brainwashed.

We should not be carrying anybody’s water. We should be reading, studying, debating, trying, failing and trying again. This time we’re in some deep doo.

Well, Ellen, I think you’re onto something, but I have to disagree that tying capitalism to bloated, fat and disfunctional governments is a bit of stretch. Free markets aren’t the problem. Profilgate spending and promises you can’t keep is. Greece has been in default something like 100 out of 200 years. Nothing new there….unless you read, uh what passes for financial journalism. Liberals are always searching for an answer to capitalism, particularly when times get tough (as they always do in a free market). Although this is the biggest financial crisis since the Great Depression, it isn’t the Great Depression. Yes, we have been in similar circumstances before, and so has the world, thus my comment. Forgot who said it, but love it: “The only new thing in the world, is the history you don’t know.”